News

Published on
Jan 19, 2015

Czech Republic to Tax Online Gaming Operators

The Czech Republic wants to impose a point of consumption tax on international online gambling operators serving Czech punters. The Ministry of Finance is done looking under the sofa cushions and car seats so it’s asking internationally licensed gambling operators to turn out their pockets — 20% of revenue to start, maybe 30% later. The government justified the move as a way to reclaim the annual CZK 1b (US .4m) in tax revenue. it believes these operators need to be anteing up.

For once, government projections may have some basis in reality. A bottleneck of online firms use the same WorldPay payment processor, giving the government a pretty good idea of how much money the operators take in versus how much they pay out. Local media outlet Hospodářské Noviny quoted Deputy Finance Minister Ondřej Závodský saying the government might not be able to “block these illegal movements” but that didn’t mean they couldn’t “monitor them in detail.”

The Czechs are in the process of overhauling their gambling sector, as recommended/urged/ordered by European Commission watchdogs. The government hopes to enact a new gambling regime – covering everything from online gambling to slot machines to lotteries – by early 2016. The changes include significant tax rate increase, replacing the existing 20% rate across all gambling types with a new variable rate ranging as high as 40% on live slot machine revenue.

International operators aren’t currently eligible to obtain Czech gaming licenses because they lack a physical presence in the country. The new regime that would expunge this requirement is still a year away but the government figures, why wait? The operators have cash, the government has needs… Let’s party!

Martin Lyčka, general counsel for UK-listed online betting operator Betfair, told Hospodářské Noviny that if the government made good on its vow, it was “likely” that companies like Betfair might choose to cash their Czechs and walk away. That would leave the market mostly to a few Czech-licensed online firms, including Fortuna and Tipsport.

It’s not just online firms taking it on the chin. Shortly before Christmas, the Czech city of Brno approved a blanket ban on gaming machines to take effect in 2015. The ban, which garnered the support of two-thirds of the city council, followed a vote last January that banned gaming machines in 23 city districts. That cut the number of gaming machines in the city from over 4,000 to around 1,500 and now the rest need to go. Brno is the Republic’s second-largest city and the largest to banish gaming machines since an April 2013 Constitutional Court ruling gave municipalities that power.